- The West Texas Intermediate Crude Oil market dropped a bit during the trading session on Monday, as the 200-Day EMA offered a bit of dynamic resistance.
- At this point, the market was very likely to continue pulling back just a bit, if for no other reason than the fact that it has gotten overbought.
- After all, OPEC reducing output by 2 million barrels per day was something that the market knew was going to happen at a time, so the reaction probably only has so far it can go.
Pulling back at this point more likely than not means that crude oil will go looking to reach the 50-Day EMA underneath, where I think you should find some support. If you do not, then it may reach the lows again. The main reason this market has seen a lot of negativities is that there have been serious concerns about demand destruction. After all, if the global economy is about to hit the skids, that means that demand for crude oil will almost certainly drop.
Volatility Ahead
Right now, the world is an absolute mess, because of the lockdowns that had been so prevalent for so long. This has caused major issues in the supply chain, and therefore has the effect of yanking the global economy back and forth to try to stabilize things. I think we are a long way away from true stabilization when it comes to the economy, even though some months will be good, and some months will be bad. An actual stable and normalized economy will take some time, so therefore I think you will have a lot of noise in the crude oil market as it is a direct measure of the life’s blood of global trade.
If we break above the highs of the day on Monday, then we could make a run toward the $95 level, followed by the psychologically significant $100 level. However, if we do drop down below the 50-Day EMA underneath, colored in red, that opens the possibility of a drop back down to the $80 level, which is where we had bounced from before. At this point, I think this is a market that is going to continue to see a lot of volatility, and that’s normally not a good thing.
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